The meme stocks are rallying. But for how long?
After a precipitous fall from its meteoric high last month, GameStop is back on the rise, taking with it other stocks favored by the retail investors of Reddit.
The video game retailer jumped more than 250 percent over two days, spiking 86 percent in off-market hours to an opening of $169.41. Theater chain AMC Entertainment Holdings jumped 20 percent overnight, opening at $10.91 on Thursday, while retailers Express and Bed Bath & Beyond saw smaller upticks.
However, since the markets opened, both stocks are down from their opening highs.
Last month’s rally, which saw GameStop peak at $347 from a starting point of about $17, was part of a concerted effort by a group of retail investors on the popular subreddit r/WallStreetBets to move the price of the mall retailer. As a result, hedge fund Melvin Capital, which had a short position on GameStop, suffered a substantial loss, and trading app Robinhood suspended trading on the stock, prompting a backlash. The frenzy led to a congressional hearing earlier this month with testimony from Robinhood’s CEO, leaders from several financial firms and the Reddit trader known as Roaring Kitty.
The activity comes at the tail end of the worst year for mall retail, in what was already a declining sector.
Some investors nevertheless believe in both the nostalgic advantage of the GameStop brand and that it can adjust to a digital future. As for AMC, it remains one of the only theater stocks on the market after Regal Cinemas closed in October. The company recently received an infusion in cash, and more states, such as New York, will soon allow theaters to open with limited capacity. AMC had been in decline even before the pandemic, falling more than 80 percent between 2017 and 2020, and further fell to a low of $2.27 in April of last year.